Updated Standards for SNAP-Authorized Retailers: Final Rule - Randy Alison Aussenberg Specialist in Nutrition Assistance Policy - The National ...

 
Updated Standards for SNAP-Authorized
Retailers: Final Rule

Randy Alison Aussenberg
Specialist in Nutrition Assistance Policy

December 29, 2016

                                            Congressional Research Service
                                                                  7-5700
                                                             www.crs.gov
                                                                   R44650
Updated Standards for SNAP-Authorized Retailers: Final Rule

Summary
On December 15, 2016, USDA published in the Federal Register a final rule, “Enhancing
Retailer Standards in the Supplemental Nutrition Assistance Program (SNAP).” This final rule
follows USDA-FNS’s proposed rule work earlier in the year:
        On February 17, 2016, the U.S. Department of Agriculture’s (USDA’s) Food and
         Nutrition Service (USDA-FNS) published the proposed rule.
        On April 5, 2016, USDA-FNS published a clarification of the proposed rule and
         extended the comment period to May 18, 2016.
SNAP, the largest of USDA’s domestic food assistance programs, provides benefits to eligible
participants; these benefits are redeemable for SNAP-eligible foods at SNAP-authorized retailers.
SNAP-authorized retailers are stores and other food sellers that are allowed to accept SNAP
benefits. In FY2015, the vast majority of benefits were redeemed at “super stores” and
supermarkets.
The final rule implements provisions of the Agriculture Act of 2014 (“2014 farm bill,” P.L. 113-
79) that increases inventory requirements for SNAP-authorized retailers and also addresses other
USDA-FNS policy objectives. Like the proposed rule, the final rule makes changes to 7 C.F.R.
Part 271 and Part 278 in five areas of retailer authorization policy: (1) sales of hot, prepared
foods; (2) definition of staple foods; (3) inventory and depth of stock; (4) access-related
exceptions to the rules; and (5) disclosures of retailer information.
The final rule responds to many of the comments and concerns raised about the proposed rule.
The proposed rule had been controversial, particularly the provisions not explicitly required by
the farm bill and the potential impact on smaller retailers.
The effective date for the final rule is January 17, 2017, but some aspects of the rule take effect
120 days or 365 days later.

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Updated Standards for SNAP-Authorized Retailers: Final Rule

Contents
Background: SNAP-Authorized Retailers and Related Data .......................................................... 1
Prior SNAP Retailer Inventory Regulations .................................................................................... 3
2014 Farm Bill (P.L. 113-79) Amendments to Retailer Inventory Requirements ........................... 4
Final Rule’s Changes to SNAP Retailer Standards ......................................................................... 5
    Sales of Hot, Prepared Foods .................................................................................................... 6
    Definition of Staple Foods ........................................................................................................ 7
        Multiple Ingredient Foods................................................................................................... 7
        Accessory Foods ................................................................................................................. 7
        Varieties .............................................................................................................................. 8
    Inventory and Depth of Stock ................................................................................................... 8
    Access-Related Exceptions to the Rules ................................................................................... 9
    Public Disclosure of Retailer Information .............................................................................. 10
Overview of Final Rule’s Regulatory Impact Analysis ................................................................. 12
Conclusion ..................................................................................................................................... 12

Figures
Figure 1. Share of SNAP Dollars Redeemed by Store Type, FY2015 ............................................ 2

Tables
Table 1. Retailers Authorized and Benefits Redeemed by Retailer Type, FY2015 ......................... 3
Table 2. Prior Regulations for SNAP Retailer Authorization .......................................................... 3
Table 3. Inventory Requirements for SNAP-Authorized Retailers ................................................. 9
Table 4. Revision of SNAP Retailer Standards At-a-Glance ..........................................................11

Appendixes
Appendix. Analysis of and Response to the February 2016 Proposed Rule ................................. 14

Contacts
Author Contact Information .......................................................................................................... 16

Congressional Research Service
Updated Standards for SNAP-Authorized Retailers: Final Rule

         n December 15, 2016, USDA published in the Federal Register a final rule, “Enhancing

O   
         Retailer Standards in the Supplemental Nutrition Assistance Program (SNAP).”1 This
         final rule follows USDA-FNS’s proposed rule work earlier in the year:
         On February 17, 2016, the U.S. Department of Agriculture’s (USDA’s) Food and
         Nutrition Service (USDA-FNS) published the proposed rule.2
        On April 5, 2016, USDA-FNS published a clarification of the proposed rule and
         extended the comment period to May 18, 2016.3
SNAP, the largest of USDA’s domestic food assistance programs, provides benefits to eligible
participants; these benefits are redeemable for SNAP-eligible foods at SNAP-authorized retailers.
In FY2015, SNAP had an average monthly participation of 45.8 million individuals, $74.0 billion
was obligated for the program (most of the funding is for benefits themselves), and nearly
259,000 firms were authorized to accept benefits.4 The final rule implements provisions of the
Agriculture Act of 2014 (“2014 farm bill,” P.L. 113-79) that made changes to inventory
requirements for SNAP-authorized retailers and also addresses other USDA-FNS policy
objectives. The proposed rule had been controversial, particularly the provisions not explicitly
required by the farm bill.
SNAP-authorized retailers are stores and other food sellers that are allowed to accept SNAP
benefits. Changes in retailer authorization policy can impact a range of SNAP program
stakeholders—not only retailers, but also food manufacturers and program participants. Driving
the debate over these changes has been the potential impact on smaller retailers. This report will
present a brief background on SNAP retailer authorization and related administrative data, a
summary of prior regulations, the statutory changes enacted in the 2014 farm bill, and the final
rule’s changes to the current regulations (including comparisons to the proposed rule). The
Appendix includes additional background on agency analysis of the proposed rule and
stakeholders’ reactions to the proposed rule.

Background: SNAP-Authorized Retailers and
Related Data
SNAP benefits may be redeemed only for eligible foods at authorized retailers.5 The SNAP
program authorizes retailers based, in part, on the retailer’s inventory or sales. In order to be
authorized, a retailer is generally required to (1) apply for authorization, and (2) pass a USDA-

1
  USDA Food and Nutrition Service, “Enhancing Retailer Standards in the Supplemental Nutrition Assistance Program
(SNAP),” 81 Federal Register 90675-90699, December 15, 2016. (“Final Rule”)
2
  USDA Food and Nutrition Service, “Enhancing Retailer Standards in the Supplemental Nutrition Assistance Program
(SNAP),” 81 Federal Register 8015-8021, February 17, 2016. (“Proposed Rule”)
3
  USDA Food and Nutrition Service, “Enhancing Retailer Standards in the Supplemental Nutrition Assistance Program
(SNAP) Clarification of Proposed Rule and Extension of Comment Period,” 81 Federal Register 19500-19502, April 5,
2016. (“Clarification of Proposed Rule”)
4
  USDA-FNS SNAP participation and cost data available at http://www.fns.usda.gov/pd/supplemental-nutrition-
assistance-program-snap. Authorized retailers available in 2015 Retailer Management Year End Summaries, p. 2,
http://www.fns.usda.gov/sites/default/files/snap/2015-SNAP-Retailer-Management-Year-End-Summary.pdf.
5
  For more information, see CRS Report R42505, Supplemental Nutrition Assistance Program (SNAP): A Primer on
Eligibility and Benefits, by Randy Alison Aussenberg.

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FNS administered inspection and authorization process.6 A wide range of retailers are authorized
to accept SNAP, including supermarkets, farmers’ markets, and convenience stores.
Inventory requirements for SNAP retailers are based on stock or sales of “staple foods,” defined
in statute as four categories: (1) meat, poultry, or fish; (2) bread or cereals; (3) vegetables or
fruits; and (4) dairy products.7 Although SNAP participants can buy foods that are not in staple
food categories, required staple food inventory or sales is one of the bases for authorizing a
retailer to accept SNAP benefits.
Though many different types of retailers are authorized to accept benefits, data show that the
majority of SNAP benefits are redeemed at supermarkets and superstores. In FY2015,
approximately 82% of benefits were redeemed in supermarkets and superstores.8 Although
convenience stores make up over 41% of SNAP-authorized retailers, they redeemed
approximately 5% of SNAP benefits in FY2015.9 Figure 1 displays the share of SNAP benefits
redeemed by different categories of retailers, with further detail on authorizations and
redemptions shown in Table 1. Retailer data also indicate that smaller retailers (convenience
stores, small grocery stores, medium grocery stores) received the bulk of sanctions from USDA-
FNS in FY2015; sanctions include time-limited or permanent disqualifications from SNAP.10

             Figure 1. Share of SNAP Dollars Redeemed by Store Type, FY2015

     Source: Prepared by CRS based on USDA-FNS, 2015 Retailer Management Year End Summaries, p. 2,
     http://www.fns.usda.gov/sites/default/files/snap/2015-SNAP-Retailer-Management-Year-End-Summary.pdf.
     Notes: In order to more clearly highlight small grocery stores and convenience stores, CRS collapsed categories
     of retailer types. See 2015 Retailer Management Year End Summaries for narrower category data.

6
  USDA-FNS website, http://www.fns.usda.gov/snap/retailers/application-process.htm.
7
  7 U.S.C. 2012(q).
8
  USDA-FNS, 2015 Retailer Management Year End Summaries, p. 2, available at http://www.fns.usda.gov/sites/
default/files/snap/2015-SNAP-Retailer-Management-Year-End-Summary.pdf. Note: USDA-FNS categorizes retailer
types according to definitions in an internal agency document.
9
  Ibid.
10
   Ibid., p. 12. Dividing number of sanctions by number of authorized retailers also shows that these categories also
have the highest rates of sanctions.

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       Table 1. Retailers Authorized and Benefits Redeemed by Retailer Type, FY2015
                                                                                      Amount of SNAP Benefits
                                                Retailers Authorized                       Redeemed

         Retailer Typesa                        #                   %                     $                     %

Superstores and                                      37,868             14.7%      $57,014,276,433                  82.0%
supermarkets
Medium, large, and                                   81,345             31.5%        $7,004,784,308                 10.1%
combination grocery stores
Convenience stores                                  106,531             41.2%        $3,494,342,918                   5.0%
Specialty stores                                      8,594              3.3%         $811,794,376                    1.2%
Small grocery stores                                 12,277              4.8%         $755,975,667                    1.1%
All other authorized retailer                        12,017              4.6%         $425,971,246                    0.6%
types
TOTAL                                               258,632             100%      $69,507,144,948                   100%

       Source: Prepared by CRS based on USDA-FNS, 2015 Retailer Management Year End Summaries, p. 2,
       http://www.fns.usda.gov/sites/default/files/snap/2015-SNAP-Retailer-Management-Year-End-Summary.pdf.
       a. In order to more clearly highlight small grocery stores and convenience stores, CRS collapsed categories of
            retailer types. See 2015 Retailer Management Year End Summaries for narrower category data.

Prior SNAP Retailer Inventory Regulations
This section summarizes standards for SNAP retailer authorization prior to the final rule (“prior
regulations”).
Under the prior regulations, a SNAP-eligible retailer had to meet one of two tests: criterion A
(based on store inventory) or criterion B (based on store sales).11 These rules are displayed in
Table 2.

                     Table 2. Prior Regulations for SNAP Retailer Authorization
                                      Retailers Apply via Criterion A or Criterion B
        Criterion A—Based on Inventory                                          Criterion B—Based on Sales

Offer, on a continuous basis, three varieties of                        More than 50% of the retailer’s total sales must
qualifying foods in each of the four staple food              OR        be from the sale of eligible staple foods
categories, AND
Offer, on a continuous basis, perishable foods in
at least two of the four staple food categories.

       Source: Based on 7 C.F.R. 278.1(a) (prior to final rule) and USDA-FNS website, http://www.fns.usda.gov/snap/
       retailers/store-eligibility.htm (accessed December 13, 2016).

Specialty stores, such as fruit and vegetable or seafood markets, tend to apply under criterion B
because they carry a limited number of staple food categories.
As noted above, SNAP’s authorizing law defines “staple foods” as foods in the following
categories: meat, poultry, or fish; bread or cereals; vegetables or fruits; and dairy products.12 The

11
     7 C.F.R. 278.1(a) (prior to final rule).

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law further provides that staple foods “do not include accessory food items, such as coffee, tea,
cocoa, carbonated and uncarbonated drinks, candy, condiments, and spices.”13 Under prior
regulations, foods with multiple ingredients were counted in a staple food group based on the
“main ingredient” as determined by USDA-FNS. For example, a box of macaroni and cheese
might be classified as a variety within a staple food category but in the bread or cereal category
(despite containing dairy). Prior regulation also defined perishable staple food items as “items
which are either frozen staple food items or fresh, unrefrigerated or refrigerated staple food items
that will spoil or suffer significant deterioration in quality within 2-3 weeks.”14 Regulation
specified that a “variety” of qualifying foods in a particular category means different types of
foods, not different brands, different nutrient values, different varieties of packaging, or different
package sizes; the example was given that apples, cabbage, and tomatoes are varieties in the fruit
or vegetable staple food category.15
Although retailers must offer these particular types of foods to qualify as a SNAP-eligible retailer,
SNAP participants may redeem their benefits for generally any foods for home preparation and
consumption whether they are staple foods or not. SNAP benefits may not be redeemed for
alcohol; tobacco; or hot, prepared foods intended for immediate consumption (e.g., a rotisserie
chicken). Prior regulations also made ineligible “firms that are considered to be restaurants, that
is, firms that have more than 50 percent of their total gross retail sales in hot and/or cold prepared
foods not intended for home preparation and consumption.”16 Restaurants authorized to
participate under certain states’ restaurant option (an option to assist homeless, elderly, and
disabled individuals who may have difficulty preparing food) are an exception to this 50% rule.17

2014 Farm Bill (P.L. 113-79) Amendments to Retailer
Inventory Requirements
The 2014 farm bill (enacted February 7, 2014) amended many different aspects of SNAP law,
including changes to the authorization of SNAP retailers.18 Section 4002 of P.L. 113-79 required
that retailers seeking authorization based on inventory (i.e., criterion A) will have to increase their
variety of stock. Namely, the law was amended to require stores to stock at least seven varieties of
staple foods in each of the four staple food categories and to stock perishable foods in at least
three categories. Section 4002, which includes other requirements for retailers, also amended the
authorizing law to require a review of retailer applications to consider “whether the [retailer]
applicant is located in an area with significantly limited access to food.” The law’s conference
report included further information on the decision to craft this policy change.19

(...continued)
12
   7 U.S.C. 2012(q).
13
   Ibid.
14
   7 C.F.R. 278.1(b)(1)(ii) (prior to final rule).
15
   Ibid.
16
   7 C.F.R. 278.1(b)(1)(iv) (prior to final rule).
17
   This option is authorized at 7 U.S.C. 2018(h). See also relevant section of CRS Report R42505, Supplemental
Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits, by Randy Alison Aussenberg.
18
   All SNAP changes are discussed in CRS Report R43332, SNAP and Related Nutrition Provisions of the 2014 Farm
Bill (P.L. 113-79), by Randy Alison Aussenberg.
19
   H.Rept. 113-333, p. 433: “The Conference substitute adopts the Senate provision with an amendment. The
amendment strikes the language providing USDA authority to consider a store’s depth of stock, variety of staple food
(continued...)

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In a March 2014 policy memorandum, USDA-FNS said that the 2014 farm bill changes to
inventory requirements would require rulemaking to implement.20

Final Rule’s Changes to SNAP Retailer Standards
This section summarizes the USDA-FNS final rule’s changes to prior regulations and includes
comparison to the proposed rule.
As a basis for rulemaking, in the February 2016 proposed rule, USDA-FNS explained that the
proposed rule was “the result of two separate developments”: (1) the 2014 farm bill’s statutory
changes, and (2) “the effort initiated by FNS in 2013 to look at enhancing the eligibility standards
for SNAP retailers to better enforce the intent of the [Food and Nutrition Act of 2008] to permit
low-income individuals to purchase more nutritious foods for home preparation and
consumption.” Related to the latter development, USDA-FNS cited findings from an August 2013
Request for Information (RFI), which posed 14 questions to the public on SNAP retailer
eligibility and authorization. 21 USDA-FNS stated that they received from the RFI over 200
comments “from a diverse group, including retailers, academics, trade associations, policy
advocates, professional associations, government entities, and the general public.” The agency
also cited related listening sessions.
Before issuing the final rule, FNS reviewed 1,260 germane, nonduplicative comments on the
proposed rule. About 72% of comments came from retail food store representatives, owners,
managers, or employees, most of whom submitted template or form letters.22 Some Members of
Congress and other stakeholders had voiced strong opposition to aspects of the proposed rule; this
activity is summarized in the Appendix.
As the proposed rule would have, the final rule makes changes to 7 C.F.R. Part 271 and Part 278
in five areas of retailer authorization policy: (1) sales of hot, prepared foods; (2) definition of
staple foods; (3) inventory and depth of stock; (4) access-related exceptions to the rules; and (5)
disclosures of retailer information. The final rule’s ultimate changes in some ways vary
significantly from those in the proposed rule.

(...continued)
items, and the sale of excepted items when approving a retailer. The amendment requires that retailers offer for sale on
a continuous basis a variety of at least seven foods in each of the four categories of staple foods categories.... The
conference substitute reduces fraud at retail stores by requiring a more rigorous standard for stores to become eligible
to process SNAP benefits. Section 4002 requires participating retailers to stock perishable items in at least three of the
four staple food categories: dairy products; meat, poultry, or fish; fruits or vegetables; and bread or cereals. Currently, a
store stocking as few as twelve food items, many of which have limited nutritional value, could be eligible to be a
SNAP retailer. To address this, the conference substitute requires retailers to stock, at a minimum, seven food items in
each of the staple food categories to be eligible. The Managers intend for this requirement to serve as a minimum
requirement and do not intend in any way to discourage or prevent more robust depth of stock. The Managers remain
concerned with retailers that meet the minimum of the existing regulations as a way to gain entry into SNAP for the
sole purpose of expanding sales of excepted items, including liquor and tobacco, which is decidedly contrary to the
intent of the program.”
20
   Jessica Shahin, Supplemental Nutrition Assistance Program Provisions of the Agricultural Act of 2014 -
Implementing Memorandum, USDA-FNS, March 21, 2014, http://www.fns.usda.gov/sites/default/files/
SNAP%20Provisions%20of%20the%20Agricultural%20Act%20of%202014%20-%20Implementing%20Memo.pdf.
21
   USDA Food and Nutrition Service, “Request for Information: Supplemental Nutrition Assistance Program (SNAP)
Enhancing Retail Food Store Eligibility,” 78 Federal Register 51136-51138, August 20, 2013.
22
   See the final rule preamble (pp. 90677-90697) for analysis of comments and how they informed decisionmaking.

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These areas are briefly discussed in the sections to follow. The final rule is presented “at-a-
glance”—as compared to the proposed rule and the prior regulations—in Table 4 at the end of
this section.
Throughout the proposed and final rules, USDA-FNS expresses the objectives to improve access
to healthy foods and to preserve the integrity of the program. The statute as amended by the farm
bill explicitly requires
           an increase in the minimum number of food varieties and perishable varieties for
            retailers authorized under criteria A (discussed further below in “Inventory and
            Depth of Stock”); and
           access-related exceptions to retailer authorization (discussed further below in
            “Access-Related Exceptions to the Rules”).
USDA-FNS acknowledges throughout the final rule’s preamble that the regulatory changes in
other areas are discretionary.

         Note: Neither the 2014 farm bill nor the proposed or final rules make changes to foods eligible for
         purchase by SNAP participants. Although the proposed rule would place more stringent requirements
         on the foods stocked by authorized retailers, it does not change what customers may purchase with their
         SNAP benefits. In general, SNAP benefits may be redeemed for any foods for home preparation and
         consumption. SNAP benefits may not be redeemed for alcohol, tobacco, or hot foods intended for
         immediate consumption. (More details about SNAP-eligible foods are available in CRS Report R42505,
         Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits.)

The effective date for the final rule is January 17, 2017, but most aspects of the rule take effect
120 days or 365 days later. Unless otherwise indicated in the sections to follow, the final rule
takes effect
           120 days after January 17, 2017 for new retailers applying for authorization or
            retailers applying to reinstate their authorization, and
           365 days after January 17, 2017, for existing SNAP-authorized retailers.

Sales of Hot, Prepared Foods
Hot, prepared foods are not eligible for purchase with SNAP benefits, and prior regulations
required Criteria A and B retailers to have no more than 50% of their sales in hot or cold prepared
foods. Ultimately, the final rule kept this 50% threshold in place but specified that it applies to
“foods cooked or heated on-site by the retailer before or after purchase.”23 Under prior
regulations, there had been a loophole apparently exploited by some retailers who sell uncooked
foods for SNAP purchase and then offer to heat or cook those foods for customers (for free or for
a small fee).24
The final rule does not adopt the proposed rule’s proposal to require that at least 85% of an
authorized entity’s total food sales must be for items that are not cooked or heated onsite before
or after purchase. (In other words, the proposed rule would have required that no more than 15%

23
   Final rule preamble, p. 90861.
24
   Proposed rule preamble, p. 8016. In the proposed rule’s preamble, USDA-FNS agency said “nothing in current
regulations specifically prohibits items sold for SNAP benefits to be sold cold at the point-of-sale and heated or cooked
in the store after purchase.” The agency “[thought] it is important to maintain the intent of Congress’s restriction on hot
food purchases.”

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of total food sales may be from these foods cooked or heated on-site.) In the final rule’s preamble,
USDA-FNS expressed particular concern that comments and data subsequently reviewed showed
that the 85/15% threshold would make most convenience stores ineligible for SNAP
authorization.25
The proposed rule also would have added measures aimed at preventing one business from
splitting into two to circumvent these restaurant-related SNAP rules. In the final rule, USDA-FNS
clarified that it will consider separate businesses to be one if the co-located businesses share
ownership, sale of similar or same food products, and inventory.26
The final rule’s hot, prepared foods provisions will take effect for all retailers 120 days after
January 17, 2017.

Definition of Staple Foods
The final rule would change the regulatory definition of staple foods in several respects.
Ultimately, the final rule did not change multi-ingredient rules, but it did change policy around
what foods count as separate varieties.

Multiple Ingredient Foods
Under prior regulation, foods with multiple ingredients were only counted in one staple food
category based on the item’s main ingredient. For example, as mentioned above, the box of
macaroni and cheese would be counted as “bread or cereal” for retailer authorization purposes.
In the final rule, USDA-FNS maintained this multiple ingredient policy, taking into account many
related comments on the proposed rule.27 The final rule rejected the proposed rule’s policy that
commercially processed foods and prepared mixtures would not have been counted in any staple
food category for retailer authorization.28 For example, inventory of TV dinners, macaroni and
cheese, and canned soups would not have counted toward a store’s inventory (or sales)
requirements for authorization. (Such foods would have remained eligible for SNAP purchase.)

Accessory Foods
Under prior regulation, accessory foods were not counted as staple foods. This is maintained and
expanded in the final rule.
Prior regulations defined “accessory foods” as the specific foods listed in the statute: “coffee, tea,
cocoa, carbonated and un-carbonated drinks, candy, condiments, and spices.”29
The final rule expands this regulatory definition, but in a way that is more narrowly tailored than
the proposed rule’s approach.30 The final rule expands the list of accessory food items as follows:

25
   Final rule preamble, p. 90683.
26
   Final rule preamble, p. 90684.
27
   Final rule preamble, p. 90678.
28
   USDA-FNS had argued that the prior regulations’ policy could be confusing and required close examination of
product labels. In the proposed rule preamble, the agency mentioned that one company’s frozen chicken pot pie may
have the main ingredient of chicken, while another company’s may have the main ingredient of bread.
29
   Section 3(q)(2) of the Food and Nutrition Act of 2008, codified at 7 U.S.C. 2012(q)(2).
30
   The proposed rule would have expanded the list of accessory food items to include “foods that are generally
consumed between meals and/or are generally considered snacks or desserts ... such as ... chips, dips ... cupcakes ...
(continued...)

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          Accessory food items include foods that are generally considered snacks or desserts such
          as, but not limited to, chips, ice cream, crackers, cupcakes, cookies, popcorn, pastries,
          and candy, and food items that complement or supplement meals such as, but not limited
          to, coffee, tea, cocoa, carbonated and uncarbonated drinks, condiments, spices, salt, and
          sugar.31
The final rule also establishes that “[i]tems shall not be classified as accessory food exclusively
based on packaging size,” and “[a] food product containing an accessory food item as its main
ingredient shall be considered an accessory food item.”32

Varieties
Criterion A authorization is based, in part, on a retailer’s stocking a certain number of varieties in
each staple food category. The 2014 farm bill requires an increase in varieties offered
(implementation discussed in “Inventory and Depth of Stock”). The final rule includes increased
flexibility to help stock the required number of varieties. In particular, the regulations are
amended to count plant-based sources as varieties for the “meat, poultry, or fish” and “dairy
products” staple food groups.33 For instance, nuts, seeds, and beans can now be varieties of
“meat, poultry, and fish.” In addition, the final rule’s preamble, as guidance, includes a list of
examples of varieties in each staple food category.34

Inventory and Depth of Stock35
The final rule codifies the 2014 farm bill’s mandatory changes for retailers applying for
authorization under criterion A (inventory-based) by
         increasing the required minimum variety of foods in each staple food category
          from three to seven varieties, and
         increasing the perishable foods requirement from two staple food categories to
          three staple food categories.
The final rule also adds specifications on the depth of stock; that is, how many of each item are
for sale. Under prior regulations, a retailer could be authorized with a minimum stock of at least
12 food items (one item each of three varieties in each of the four categories, including perishable
requirements); proposed and final rules sought to change that.
The final rule would not only implement the farm bill’s staple food changes to 28 varieties (seven
varieties in each of the four categories, including perishable requirements), but it would add a
numeric depth of stock requirement of three stocking units per variety.36 Under this requirement,

(...continued)
candy, or food items that complement or supplement meals, such as ... coffee, tea, carbonated and uncarbonated
drinks.” USDA-FNS stated that “counting such foods as accessory items will ultimately encourage stores to offer more
nutritious options and provide SNAP recipients access to a larger selection of healthy foods.” Proposed rule preamble,
pp. 8017-8018.
31
   Final rule preamble, p. 90680.
32
   Ibid. The final rule preamble discusses that this change prevents potato chips from being counted as a staple food in
the fruits and vegetables category.
33
   See final rule preamble, pp. 90689-90691.
34
   Final rule preamble, pp. 90692-90694.
35
   Proposed rule, p. 8018. This section also refers to Clarification of Proposed Rule, 19500-19502.
36
   In its April 5, 2016, clarification, USDA-FNS indicates that the stocking unit is the unit of household purchase; for
(continued...)

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a store is required to keep in stock a minimum of 84 staple food items. In the final rule, USDA-
FNS halved the proposed rule’s depth of stock policy, which would have required six-item depth
of stock, requiring a minimum of 168 items. The final rule also added some language to specify
that documentation may be provided in cases where it is not clear that the sufficient stocking
requirement has been met.
Table 3 summarizes the inventory requirements for criterion A retailers under prior, proposed,
and final regulations.
              Table 3. Inventory Requirements for SNAP-Authorized Retailers
                                                  Under Criterion A
                                   Prior Regulations               Proposed Rule                     Final Rule
Staple food categories         4                              4                              4
Varieties in each category     3                              7                              7
Minimum number of              2                              3                              3
categories that must
include perishable foods
Depth of stock for each        1 item of each qualifying      6 items of each qualifying     3 items of each qualifying
variety                        variety                        variety                        variety
Minimum stocking total         12 items                       168 items                      84 items
(considering staple food
categories, varieties, and
depth of stock)

     Source: Prepared by CRS, based on unamended 7 C.F.R. 278.1, the proposed rule, clarification of proposed
     rule, and final rule.

Access-Related Exceptions to the Rules
Prior to the 2014 farm bill, a community’s access to a SNAP-authorized retailer was not a
consideration in granting or denying a retailer’s application for authorization. Implementing the
2014 farm bill language, the proposed rule, as described in its preamble, would have allowed
USDA-FNS to consider need for access “when a retailer does not meet all of the requirements for
SNAP authorization.” USDA-FNS proposed a list of factors that they may consider in making
this access determination.37
The final rule implements the access-related exceptions with some additional details. It includes a
more inclusive list of factors to be considered: “access factors such as, but not limited to, the
distance from the applicant firm to the nearest currently SNAP authorized firm and transportation
options ... FNS will also consider factors such as, but not limited to, the extent of the applicant
firm’s stocking deficiencies in meeting Criterion A and Criterion B and whether the store furthers
the purposes of the Program.” The final rule also clarifies that FNS’s considerations will occur
during the application process.38

(...continued)
example, one can of tuna, one banana, or one jar of applesauce is a stocking unit. Clarification of Proposed Rule,
19500-19502, April 5, 2016.
37
   Proposed rule, p. 8018.
38
   Final rule, p. 90699.

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Public Disclosure of Retailer Information
The final rule allows USDA-FNS to disclose to the public specific information about retailers that
have been disqualified or otherwise sanctioned for SNAP violations. The agency argued, in the
proposed rule, that this information would assist in the agency’s efforts “to combat SNAP fraud
by providing an additional deterrent” and would “provide the public with valuable information
about the integrity of these businesses and individuals for future dealings.”39 The final rule
clarifies that disclosure of these sanctions will only be for the duration of the sanction.
This policy will take effect on January 17, 2017.

39
     Proposed rule, p. 8018.

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                     Table 4. Revision of SNAP Retailer Standards At-a-Glance
              Comparison of Prior SNAP Regulations with USDA-FNS’s Proposed and Final Rules
                                                                USDA-FNS Proposed               USDA-FNS Final Rule on
                            Prior SNAP Retailer                   Rule on Retailer                Retailer Standardsc
       Topic               Standards Regulationsa                   Standardsb

Sales of hot,             Applicant retailers with 50%        In addition, to be SNAP-          Same as prior regulations,
prepared foods (not       or greater of sales in hot or       authorized, a retailer must       but now retailers cannot
paid for with SNAP        cold prepared foods are             have 85% (or more) of its sales   have 50% or greater of sales
benefits)                 ineligible to be SNAP               in foods that are not cooked or   in hot or cold prepared
                          authorized (with the                heated on-site (before or after   foods and foods cooked or
                          exception of the restaurant         purchase). In other words, a      heated on-site by the retailer
                          option operating in some            retailer must not have more       before or after purchase.
                          states to serve elderly,            than 15% of its sales in these
                          disabled, and homeless              foods (with the exception of
                          individuals).                       the restaurant option
                                                              operating in some states to
                                                              serve elderly, disabled, and
                                                              homeless individuals).
Multi-ingredient foods’   Counted in the staple food          Would not be counted as a         Same as prior regulations.
categorization as         category based on the main          staple food.
staple foods              ingredient.
Accessory foods’          A short list of accessory           A longer list of foods would      Similar to proposed rule.
categorization as         foods are not counted as            be considered accessory
staple foods              staple foods.                       foods, not counted as staple
                                                              foods.
Defining a variety        Varieties are different types       Similar to prior regulations.     Changes examples listed to
                          of foods within each staple                                           provide increased flexibility
                          food category (examples                                               in certain staple food
                          listed in regulation), different                                      categories.
                          brands, nutrient values,
                          packaging sizes do not
                          constitute a different variety.
Requirements for          3 varieties in each of the 4        7 varieties in each of the 4      Same as proposed rule, but
stocking varieties        staple food categories.             staple food categories.           depth of stock requirement
for criterion A           Including perishable items in       Including perishable items in     of 3 items, for a total of 84
applications (see         2 of the 4 staple food              3 of the 4 staple food            staple food items required.
also Table 3 above)       categories.                         categories.
                          A total of 12 staple food           Depth of stock requirement
                          items required.                     of 6 items, for a total of 168
                                                              staple food items required.
USDA-FNS                  Not explicitly in retailer          FNS would consider                Similar to proposed rule.
consideration of          regulation.                         “whether the applicant is
community’s need                                              located in an area with
for access                                                    significantly limited access to
                                                              food.”
Public disclosure of      Not explicitly in regulation.       Would allow FNS to disclose       Similar to proposed rule.
disqualified or                                               this information to public.
sanctioned retailers’
information

     Source: Summary prepared by CRS, using regulations and Federal Register publications listed.
     a. Based on 7 C.F.R. 278.1.

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     b.   Based on USDA Food and Nutrition Service, “Enhancing Retailer Standards in the Supplemental Nutrition
          Assistance Program (SNAP),” 81 Federal Register 8015-8021, February 17, 2016; and “Enhancing Retailer
          Standards in the Supplemental Nutrition Assistance Program (SNAP) Clarification of Proposed Rule and
          Extension of Comment Period,” 81 Federal Register 19500-19502, April 5, 2016.
     c.   Based on USDA Food and Nutrition Service, "Enhancing Retailer Standards in the Supplemental Nutrition
          Assistance Program (SNAP),“ 81 Federal Register 90675-90699, December 15, 2016.

Overview of Final Rule’s Regulatory Impact
Analysis40
As with the proposed rule, within the final rule’s preamble, USDA-FNS included a summary of
its Regulatory Impact Analysis (RIA).41 The RIA included qualitative benefits of the final rule
such as improving SNAP recipients’ access to a variety of healthy food options and authorizing
retailers in a way that is consistent with the purposes of SNAP. The analysis estimated that the
total cost to the federal government for the agency’s increased store inspections would be
approximately $3.7 million in FY2018 and $15 million over five years.
Under the agency’s Regulatory Flexibility Act (RFA) analysis, also referenced in the RIA,
USDA-FNS focused on the impacts for small businesses.42 As discussed in the Appendix, and as
USDA-FNS acknowledges in the final rule’s preamble, some of the opposition to the proposed
rule criticized the agency’s analysis, arguing that the analysis had underestimated the financial
impact on small retailers. The final rule’s RIA and RFA analysis reflect a revised methodology
(that now includes opportunity costs and administrative costs) and the final rule’s differing policy.
The analysis estimated that the inventory changes in the final rule would impact approximately
187,000 smaller retailers (this is 70% of all SNAP-authorized retailers in July 2016).43 Based on a
sample of small SNAP retailers’ inventory checklists, USDA-FNS estimated an average cost per
retailer of $245 in the first year and about $620 over five years.44 The analysis estimated that over
87% of the currently participating small retailers would not meet the increased variety
requirements, but that most would meet the new perishable requirements.45
See the Appendix for an overview of the proposed rule’s RIA and RFA analysis.

Conclusion
The effective dates for the updated SNAP retailer standards occur during the 115th Congress.
USDA-FNS will be administering the new standards for retailers at a time of presidential and
policy-official transition. New SNAP retailers will be applying for authorization under the new
rules, and existing authorized retailers may be revising their inventory to meet the new rules. The

40
   This section draws from final rule preamble, pp. 90696-90697.
41
   The final rule’s full RIA is available at https://www.regulations.gov/document?D=FNS-2016-0018-1267 (Hereinafter
cited as “Final full RIA”).
42
   The Regulatory Flexibility Act (5 U.S.C. §§601-612) requires agencies to estimate economic and other effects of
rules on “small entities,” including small businesses. See CRS Report RL34355, The Regulatory Flexibility Act:
Implementation Issues and Proposed Reforms, coordinated by Maeve P. Carey.
43
   These retailers are those categorized as combination stores, convenience stores, or small grocery stores. Final full
RIA, pp. 4, 8 (Final full RFA available at https://www.regulations.gov/document?D=FNS-2016-0018-1266.)
44
   Final full RIA, p. 2.
45
   Final full RFA, p. 3.

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perceived benefits and costs in implementing the updated standards may impact subsequent
rulemaking. Also, because much of the updated standards originate from a 2014 change in
authorizing law, Congress may have interest in changing the law again, and related issues may
come up in the formulation of the next farm bill.

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Appendix. Analysis of and Response to the
February 2016 Proposed Rule
More details on the proposed rule and stakeholders’ response are included in this Appendix.

Overview of USDA-FNS’s Regulatory Impact Analysis for the
Proposed Rule46
Within the proposed rule, USDA-FNS included a summary of its Regulatory Impact Analysis
(RIA).47 The RIA included qualitative benefits of the proposed rule such as improving SNAP
recipients’ access to a variety of healthy food options and authorizing retailers that are consistent
with the purposes of SNAP. The analysis quantified minor costs to the federal government,
finding that existing administrative funds would be used to enforce the proposed rule but that
there may be an initial increase in requests for administrative reviews (a retailer-initiated appeals
process), increasing costs by less than $150,000.
Under the agency’s Regulatory Flexibility Act analysis, USDA-FNS quantified the costs for
smaller retailers.48 USDA-FNS estimated costs to those establishments that are minimally stocked
and to those that are primarily restaurants. Based on a sample of small SNAP retailers’ inventory
checklists, USDA-FNS estimated an average cost per retailer of $140 to meet the new
requirements. The sample-based estimates found that nearly 89% of the currently participating
small retailers would not meet the increased variety requirements but that just over 1% would not
meet the increased perishable requirements.49 The USDA-FNS analysis found that the rule would
impact nearly 195,000 small businesses.

Responses to the Proposed Rule
This section provides an overview of reactions to the proposed rule. The rule received formal
comments from a wide range of stakeholders. There was also a range of 114th Congress activity
around the rule, including related provisions in committee-reported FY2017 appropriations bills.

Regulatory Comments from a Wide Range of Stakeholders
The proposed rule’s comment period closed on May 18, 2016. The docket for the rule shows the
agency has received over 1,260 submissions/comments.50 Comments were submitted by anti-
hunger advocacy groups, food suppliers, other retailer organizations, local governments, and

46
   This section draws on the proposed rule, pp. 8018-8020. For background on the analysis required in federal
rulemaking, see CRS Report R41974, Cost-Benefit and Other Analysis Requirements in the Rulemaking Process,
coordinated by Maeve P. Carey.
47
   The summary included in the proposed rule is available at USDA Food and Nutrition Service, “Enhancing Retailer
Standards in the Supplemental Nutrition Assistance Program (SNAP),” 81 Federal Register 8018-8021, February 17,
2016. The full RIA is available at https://www.regulations.gov/document?D=FNS-2016-0018-0006 (Hereinafter cited
as “Full RIA”).
48
   The Regulatory Flexibility Act (5 U.S.C. §§601-612) requires agencies to estimate economic and other effects of
rules on “small entities,” including small businesses. See CRS Report RL34355, The Regulatory Flexibility Act:
Implementation Issues and Proposed Reforms, coordinated by Maeve P. Carey.
49
   Full RIA, p. 3.
50
   Available at https://www.regulations.gov/docket?D=FNS-2016-0018.

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many other organizations and private individuals (many of whom are operators of small stores).
This section discusses some of the comments submitted; CRS has not reviewed all comments.
Those critical of the proposed rule included, in particular, the National Association of
Convenience Stores (NACS), whose members would be affected by it. NACS submitted 67 pages
of comments and encouraged its members to respond.51 In addition to concerns with
implementation of most aspects of the proposed rule, the organization commissioned an
alternative analysis of the impact and argues that the USDA-FNS regulatory analysis
underestimates costs.52 The association argues, in its comments and related documents, for
USDA-FNS to withdraw the proposed rule. In response to requests from convenience store
operators and their food suppliers, the U.S. Small Business Administration’s Office of Advocacy
also submitted comments critical of the proposed rule, though it did not request a withdrawal of
the rule.53
Stakeholders from the public health community voiced qualified support for the rule. As an
example, the American Public Health Association (APHA) supported the rule but cautioned
against unintended access-related consequences.54 APHA cautioned that improving stocking
standards alone was not enough to improve healthy eating.55

Related Congressional Activity, Including FY2017 Appropriations Bills
Prior to the close of the comment period and in actions subsequent to it, some Members of
Congress expressed their concerns, and those of other stakeholders, with the proposed rule.
The House Committee on Agriculture’s leadership, Chairman Conaway and Ranking Member
Peterson, submitted a bipartisan letter to USDA with 161 House Member signatures.56 Among
other concerns, the letter argued that “the proposed rule ... contained several provisions that went
beyond Congressional intent and what was set forth in the statutory language [of the 2014 farm
bill].” A letter to USDA was also submitted by the Congressional Black Caucus, emphasizing
access related concerns in “food desert” communities.57 The Senate Committee on Agriculture,
Nutrition, and Forestry’s leadership, Chairman Roberts and Ranking Member Stabenow, sent to
the USDA Secretary a bipartisan letter signed by 47 Senators; this letter emphasizes concerns
with access and that in the 2014 farm bill “Congress specifically acknowledged the importance of

51
   Submission includes 40 pages containing a critique of the agency’s regulatory impact analysis and an alternative
analysis. A press release on the submission and comments submitted are available at the NACS website,
http://www.nacsonline.com/Media/Daily/Pages/ND0519165.aspx#.V6kQ7FJ0fCQ.
52
   See pp. 16-17 of the NACS comments for its cost estimates and related arguments.
53
   Comments available at https://www.sba.gov/advocacy/5-17-2016-enhancing-retailer-standards-supplemental-
nutrition-assistance-program-snap.
54
   Comments available at https://www.apha.org/~/media/files/pdf/advocacy/testimonyandcomments/
160518_apha_snapretail.ashx.
55
   Citing related work from the Robert Wood Johnson Foundation, concerning the value of improving stocking
requirements but also the value in supporting those requirements with marketing other strategies. Robert Wood Johnson
Foundation, Healthy Eating Research, Minimum Stocking Levels and Marketing Strategies of Healthful Foods for Small
Retail Stores, Princeton, NJ, 2016, http://healthyeatingresearch.org/research/minimum-stocking-levels/.
56
   House Committee on Agriculture, “House Agriculture Committee Leaders Raise Concerns over FNS Retailer
Proposed Rule,” press release, May 17, 2016, http://agriculture.house.gov/news/documentsingle.aspx?DocumentID=
3358.
57
   Helena Bottemiller Evich and Ian Kullgren, “Congressional Black Caucus asks USDA to scrap SNAP stocking rule,”
Politico, May 16, 2016, http://www.politico.com/tipsheets/morning-agriculture/2016/05/congressional-black-caucus-
asks-usda-to-scrap-snap-stocking-rule-epa-launches-billboard-probe-this-week-ag-approps-214311.

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preserving food access and deliberately chose not to make modifications related to percentages of
sales of hot foods.”58
The proposed rule also came up during multiple congressional hearings in the 114th Congress.
Undersecretary Kevin Concannon was asked about it during hearings on the USDA-FNS FY2017
budget; in one House hearing, he responded by discussing concerns with current retailers skirting
the hot foods prohibition, an interest in improving participants’ access to healthy foods, and
reasons to ask small stores to offer more than they currently do.59 Ultimately, both the House- and
the Senate-reported FY2017 Agriculture and Related Agencies appropriations bills included
language that would have limited USDA’s discretion in setting retailer standards. The House-
reported bill (H.R. 5054, Section 763) and the Senate-reported bill (S. 2956, Section 752) would
have limited the scope of an interim final or final rule to the 2014 farm bill’s specific changes,
though each bill’s exact language varies.
Among other SNAP retailer and integrity topics, the proposed rule was discussed during much of
a May 11, 2016, House Committee on Agriculture SNAP hearing60 and, in questions from the
chairman, during a June 9, 2016, House Committee on Oversight hearing.61

Author Contact Information

Randy Alison Aussenberg
Specialist in Nutrition Assistance Policy
raussenberg@crs.loc.gov, 7-8641

58
   Senate Committee on Agriculture, Nutrition, and Forestry, “Bipartisan Senators Urge USDA to Revise SNAP Rule,”
press release, August 2, 2016, http://www.agriculture.senate.gov/newsroom/rep/press/release/bipartisan-senators-urge-
usda-to-revise-snap-rule.
59
   “House Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration Holds
Hearing on President Obama’s Fiscal 2017 Budget Proposal for USDA Food and Nutrition Service,” CQ
(Congressional Transcripts), February 24, 2016, http://www.cq.com/doc/congressionaltranscripts-4843447?0&search=
4Qq2c1q4.
60
   U.S. Congress, House Committee on Agriculture, The Past, Present, and Future of SNAP: The Retailer Perspective,
114th Cong., 2nd sess., May 12, 2016, http://agriculture.house.gov/calendar/eventsingle.aspx?EventID=3334.
61
   U.S. Congress, House Committee on Oversight and Government Reform, Subcommittee on the Interior, SNAP:
Examining Efforts to Combat Fraud and Improve Program Integrity, 114th Cong., 2nd sess., June 9, 2016,
https://oversight.house.gov/hearing/snap-examining-efforts-to-combat-fraud-and-improve-program-integrity/.

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